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ChaseOrstad
Frequent Contributor

What flag will the managed money be trading under?


Macro traders and fund managers for years have followed two simple rules: "the trend is your friend," and "don't fight the US Fed"... Bernanke used the analogy that the Fed asset purchases of $85 billion a month is like a person driving a car very fast down the freeway. "Tapering" these purchases is nothing more than the driver of the car modestly slowing down. From my perspective this means if the Fed was driving 85MPH and slows down to 65MPH then macro traders and fund managers who like to follow will be slowing down as well. Those investors who do not recognize the Fed is taking their foot off the pedal may simple crash their cars and create a major pile up.

 

Racing Flags.jpg

 

 

 

Moral of the story, we could soon be racing under some type of caution, the question is will it be the yellow "caution" flag, the black "return to your pit" flag, or the red "stop racing" flag. Traders have been saying for years, "when the music stops, in terms of liquidity, things will get extremely complicated." I am thinking we could soon see this play out. The only hope for things to stay status-quo (and for the Fed to keep their foot on the gas pedal) is if the US economy starts to backpedal. This might seem like a long shot, but I wouldn't completely rule it out. Retail sales for June were reported this week and they came in at a disappointing .4% vs. the .8% the trade was expecting. April to May retail sales were also revised lower this week. In addition to retail sales struggling, there is some more recent concern about the US housing market. Last week's weekly Mortgage Bankers Association index of mortgage applications declined, with actual "purchase applications" declining 3%.

 

Keep in mind, mortgage "purchase applications" have now declined eight out of the last nine weeks. Maybe even more concerning is the fact mortgage applications are now falling at the fastest rate in over three years. We also need to realize the EU is by no means out of the woods and is struggling to emerge from recession. European car sales have now slumped to a two-decade low, German investor confidence unexpectedly dropped, and euro-area exports fell for a second month. adding to signs that the region is struggling to emerge from recession.

 

Bottom-line, while racers have greatly increased their speed the past few years, we are heading into some twist and turns that will require driving with "two-feet." My guess is while racers switch rapidly from the brake to the throttle many accidents will occur.

 

Best advise, buckle up, and pay close attention the "pace car," in this case the US Fed. Remember, the use of the "pace car" has the side effect of pushing all the competitors together, so any advantage of one car over another that remains on the same lap is virtually eliminated. This "drawing together" effect can make racing more competitive; conversely, it can be viewed as preventing faster drivers and cars from receiving appropriate rewards for their efforts. My fear is just the thought of the "pace car" slowing down might prompt some racers to look for other venues???

 

Courtesy of  Van Trump Report

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3 Replies
Slim123
Senior Contributor

Re: What flag will the managed money be trading under?

I get a feeling some new posters are trying to drum up new business. I am sure the good people at Agricuture .com would let you BUY a advertising space for von trump!

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c-x-1
Veteran Advisor

Re: What flag will the managed money be trading under?

Chase, would you kindly simplify your story as the fed slowing down a bit pertains (would pertain) to the grain markets .i.e. the spec cars (to use your analogy) are much more abundant this year than last in the Corn market.

 

how do you see these fed implications SPECIFICALLY influencing grain trade?

 

thank you

c-x-1

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pritchh
Senior Contributor

Re: What flag will the managed money be trading under?

The author is very misinformed. 1, any mkt is not polar, there is a long and a short.  2. the FED saved the system this time, it didn't have to happen that way.   3. the economic trends have been recognizable, and tight to their trendline.  4. The FED sets the FF rate and may buy long term treasuries but  they do not set rates past overnight.

 

Does this guy think earnings will drop if teh FED buys less bnds or he is saying he has not owned equities. 

 

Credit markets are in a massive artificial stance and they are starting to spill out, once teh public learns that when rates go uo, bnd funds go down there will be no bid.

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